StakeWise Tokenomics Proposal (veSWISE)

[0xwoody]

Tried to pull all together and summarize

Here:

SWISE Locking Merits Discussion

Hey took it upon myself to kickstart this / pull it all together @kiriyha - not able to add / tag anyone else for some reason. Discussing the merits of locking SWISE in exchange for some benefits Arguments For veSWISE gauge pool would be directed towards node operators. Could potentially be a flywheel for the token to have governance power in deciding fee levels for specific node operators. Initially it would likely just be a kiss - node operator buys SWISE & votes for themselves to get to …

And here:

SWISE Protocol Fee Distribution Discussion

Hey took it upon myself to kickstart this / pull it all together @kiriyha - not able to add / tag anyone else for some reason. Protocol fee distribution. and revisit the earlier discussion about locking SWISE For Locked token not needed for rev distribution. Can simply do the xMPL model veSWISE as vehicle to open potential to ramp up veSWISE emissions for marketing/node operator incentive flywheel (without creating incremental sell pressure). If we are trying to tweak tokenomics to incorpor…

[ottodv]

@kiriyha

Without taking either side, just a suggestion - let’s split the topic at hand into 2 portions:

1. discussing the merits of locking SWISE in exchange for some benefits
2. protocol fee distribution. and revisit the earlier discussion about locking SWISE

I don’t really want to rehash all the reasons locking sucks yet again. For now I suggest we freeze that topic and instead discuss protocol fee/profits distribution.

Protocol fee/profits distribution is what is really going to add value to the Swise token, I also think we need this sorted before we move on a number of other topics, including the referral rewards proposal(s).

[FaultProofBen]

Hey everyone,

Like some others on here I am against token locks. I don’t think a locking mechanism places any actual buy pressure on SWISE itself, as removing supply would just make SWISE less liquid, amplifying volatility on both the upside and downside. It also increases the risk of large sell-offs around mass-unlock events. I am also against implementing a gauge system with emissions, as doing so would introduce a source of perpetual sell-pressure from people farming SWISE rewards.

I am very much in favor of some sort of revenue share with holders, and I think the best way to do so would be via sETH2/rETH distributions. This would not only provide holders with an attractive ETH yield, but would also help encourage the use of StakeWise’s product by getting sETH2/rETH into the hands of more people.

I think this would significantly improve the value proposition of SWISE by more closely tying its value to the growth of the protocol (which is in the DAO’s interest as the treasury primarily consists of SWISE). Given that revenues should grow considerably post-merge, were this implemented, I think StakeWise would have among the strongest tokenomics in all of DeFi.

[Steel.Key]

Shifting the concept of locking to the ideas section SWISE Locking Merits Discussion

Would love to hear everyone’s opinion so I created a poll to gauge temperature as well.

[bZ1]

I applaud you for the detailed proposal @Steel.Key!

There is a lot to unpack here, so bare with me as I try to understand.

@Steel.Key

Out of this 3% that is bought back & distributed to SWISE stakers, we suggest implementing a vote lock mechanism “veSWISE”. If a staker locks for a longer period of time – say one year, six months, three months, they would be entitled to a higher yield to compensate for that illiquidity. This would ensure that stakers that are more committed to the longer-term success of $SWISE are relatively rewarded and it would benefit the $SWISE community by incentivizing participants to reduce the amount of marketable circulating supply of $SWISE.

Few questions here:

1. Would the specification be that the StakeWise team would create a new contract like in @vlad’s proposal that @kiriyha linked or are you suggesting we outsource this to another protocol (could even be a great SWAT proposal)?
2. Have you done any analysis on what kind of price impact this proposal can have?
3. What is the cost of this? (i.e. extra gas fees if another layer, dev resources, SWISE incentives)

I think this is an interesting idea to implement, although I am trying to think if this is really necessary right now given the main priority is growing TVL.

@Steel.Key

Appointing a marketing arm to help support/decide on allocations involving direct-to-consumer community building, sponsor podcasts (ex. RocketPool & Bankless)

I am slowly warming up to this idea of marketing, but we would to set this up correctly to maximize ROI. Any suggestions on how to approach a marketing campaign for StakeWise?

[Steel.Key]

@bZ1

Few questions here:

1. Would the specification be that the StakeWise team would create a new contract like in @vlad’s proposal that @kiriyha linked or are you suggesting we outsource this to another protocol (could even be a great SWAT proposal)?
2. Have you done any analysis on what kind of price impact this proposal can have?
3. What is the cost of this? (i.e. extra gas fees if another layer, dev resources, SWISE incentives)

Hi @bZ1 - good questions.

1. So I think it could be either though likely a decision for the team based on their internal resources whether it makes sense to build out internally vs outsource. Don’t think we’d outsource to a separate protocol to manage the staking interface itself per se (if that is what you are referring to) though definitely could outsource the code development. Definitely could be a good SWAT initiative to spearhead an RFP process there.

2. So this is a tough exercise to be exact about with alot of moving pieces (ETH/SWISE price ratio, % staked, etc.) but most definitely a positive impact vs status quo. I think of the price impact in two parts really (a) the market perceptive of fair value of SWISE (which would very likely increase once rev share is in place) & (b) the change in token supply/demand equilibrium.

For (a) we are in process of tweaking this proposal towards an xSWISE/rSWISE Model introduced in SWISE Locking Merits Discussion which we plan repost later this week. That will have some more analysis in it but at current ETH/SWISE ratios, staking yields could be as high as 8% with 20% circ supply staked resulting in incremental buying demand (given the yield) & a supply sink (via staked xSWISE) which would both have positive impacts on price. Additionally would note a stabilization in price as well, as declines in SWISE/ETH ratio during sell offs like we are see now, those yields would actually increase, incentivizing more people to buy/stake SWISE during sell offs which would reduce volatility.
For (b) I think the supply sink mentioned previously would be largest impact though there is also a consistent buy pressure from SWISE buybacks. Current DAO Rev run rate of 317 ETH per @kiriyha is about $475K/year (@ $1.5KETH). While small vs current daily run rate trading volume of about $273M (365x $750K), that’s not too dissimilar to BTC havenings vs BTC trading volumes and similarly would expect positive impact to be felt over 3-6mo time frame after implementation (all else equal). Putting any exact price level to this though would really be a finger in the air type exercise.

3. Cost would largely be dev resources which as discussed wouldn’t be a bad thing for SWAT to RFP. Would be some gas costs but likely minimal as you could execute the SWISE buybacks/distributions at times when ETH gas is low. (could maybe be written into smart contract to execute when gas 1 standard deviation below 7day avg potentially, etc. or just programmed to be done on the weekend at 1am UTC) No SWISE incentives (apart from maybe payment to devs) as its really just redistribution of current revenue.

Appreciate the questions. Let me know if I was clear on the above points or if you need any clarification.

[Steel.Key]

@bZ1

I am slowly warming up to this idea of marketing, but we would to set this up correctly to maximize ROI. Any suggestions on how to approach a marketing campaign for StakeWise?

100% agree on the need to focus on ROI and accurately tracking of mkt spend to new deposits is key. (through referral code/link, etc.) In my head I think we should be throwing as much marketing spend as possible into channels that brings in new TVL where CAC (customer acquisition costs) < 1 year est. customer revenue. So we start making profit on that deposit if it stays >1year which likely given Shaghai withdrawn timeline/general stickiness of these deposits. Also we are a start up and in process of growing network effects of available sETH2 liquidity across DeFi though AAVE, Maker, etc.

Marketing spend would likely have to be paid in SWISE which would potentially create sell pressure on the token though. That’s why I think an accrued rSWISE mechanism that we could implement in Staking is so attractive in that it can easily be leveraged for marketing as well. Can use rSWISE much more liberally for marketing given the functionality to have specific tie in’s to the associated revenue it brings in.

Rough math - we make about $3.75-$7.50 in DAO rev/year per ETH deposit (ETH @ $1,500 x 5%-10% avg yield x 5% fee= $3.75-$7.50) but spot me.

Think it makes all the sense in the world to be giving out 20 rSWISE (or ~$2 @ $0.10 SWISE) to every new sETH2 depositor if that rSWISE accrues over a 12mo time period.

Or for Bankless I heard that it cost RPL ~$75K/mo so we could look into setting up a simliar sized contract for 1mo locked rSWISE that only unlocks once they bring in >20K ETH deposits (20K x $3.75 DAO Rev/year per ETH = $75K)

Ramping up the marketing arm to take advantage of the merge narrative makes alot of sense now as there is significant amount of ETH looking to be staked over the next 3-12months.

Love where your head is at. Happy to talk off line as well.